Metro Manila, Philippines— The peso slipped to its weakest level in more than three-and-a-half years on Monday, closing above the ₱54-per-dollar level amid developments abroad as cited by economists.
The local currency closed at P54.065 versus the greenback, further falling from ₱53.75 on Friday. This is its worst performance since Oct. 15, 2018, where the peso ended at ₱54.08 to the dollar.
Regina Capital managing director Luis Limlingan said the peso’s depreciation could be linked to overseas factors “beyond our control” — particularly the tightening of the US Federal Reserve’s interest rate.
The Fed recently announced a rate hike of 75 basis points for the first time since 1994, as US authorities try to rein in commodity prices.
“[T]he Fed signaled determination to further bring down US inflation back to the 2% target even if that would require more aggressive Fed rate hikes that could entail risk of economic slowdown or even recession just to bring down inflation,” said RCBC chief economist Michael Ricafort, noting this has weighed on other Southeast Asian currencies too.
Economists also pointed out the contrast between the Fed’s hawkish stance compared to the Bangko Sentral ng Pilipinas (BSP).
“Perceived policy dissonance also causing the PHP weakness as BSP retains relatively dovish outlook vs the aggressive tightening by the Fed,” said ING senior economist Nicholas Mapa.
He likewise cited the country’s widening trade deficit for the peso’s weaker performance — caused by expensive global commodity prices and higher demand with the reopening of the local economy.
While the deficit narrowed to $4.77 billion in April, it is still near the $5-billion level tallied the month prior. March’s level was the highest in three months.
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